Dave Ramsey: To be unclear is to be unkind

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Tuesday

Jan 17, 2017 at 9:58 AMJan 17, 2017 at 9:58 AM

Dear Dave,My friend and I are roommates, and we’ve always had an agreement that we split each of the bills 50-50. We both work and have decent jobs, but for the last couple of months she’s been really late in paying her half of the bills. She says she’s broke. I don’t want to be mean, but how can I approach her about this situation?— Alice

Dear Alice,I understand that you don’t want to be mean to a friend, but situations like this should be addressed quickly and directly. No matter whether you’re talking about friendships or business dealings, to be unclear is to be unkind.

Turn off the television, sit down with her, and have a kind but firm conversation. Let her know that the roommate agreement is no longer working because she isn’t paying her bills on time. Make sure she understands that the two of you are not going to be able to stay there together anymore unless she starts paying on time. You might also ask if she needs help budgeting her money. I mean, if she’s got a good job her money has to be going somewhere, right? The problem is that it’s not going to the proper places.

I know you think that by being subtle or avoiding the situation you’re being nice, but you’re not. You’re being passive-aggressive. You just have to smile and say, “This isn’t going to happen anymore. You’re going to get your act together, and I’ll help you all I can, but you need to start paying on time or the roommate situation is over.”

Is that tough love? No, it’s just love.—Dave

Savings vs. Pay off

Dear Dave,My wife and I owe $90,000 on our mortgage, and we have no other debt. We are able to save about $20,000 a year, so we could have the house paid off in just over four years. She likes the idea of having lots of money saved up, but I would love to be completely debt-free. Should we pay off the house or hang on to the savings?— Jason

Dear Jason,Let’s pretend your house is already paid for in full. Would you borrow on your home so that you had enough cash that your wife liked it? You say you wouldn’t, so what’s the difference? If you had a paid-for house and you wouldn’t borrow on it to have cash on hand to feel better, why wouldn’t you use the cash on hand to pay off the house? It’s the same thing.

The first thing you want to consider is having an emergency fund of three to six months of expenses. You also need to make sure you’re putting aside 15 percent of your income for retirement. Other than that, if you have enough cash on hand to pay off your home and you don’t, it’s the same thing as having borrowed on your home in order to have cash on hand.

If I’m in your shoes, as soon as the emergency fund is in place — six months of expenses since your wife likes the security factor — and 15 percent is being put away for retirement, I’d take the other money and throw it at the house. Get that thing paid off as fast as you can.—Dave

— Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 12 million listeners each week on 575 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.